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Report: Sports betting holds potential as major revenue stream

By Colin A. Young, State House News Service

Updated:
03/02/2018 07:20:15 AM EST

BOSTON -- Wagers might generate between about $9 million and $61 million in state tax revenue if lawmakers decide to make sports betting legal in Massachusetts, the Gaming Commission said Thursday in a white paper that mapped out how the Legislature might think about introducing another new form of gaming in the Bay State.

Massachusetts, like many other states, is waiting to learn if the U.S. Supreme Court will strike down any or all of the Professional and Amateur Sports Protection Act, which limits which states can offer legal sports betting. A decision in the case Christie v. National Collegiate Athletic Association could come as soon as next week, and states are trying to position themselves to jump at any opportunity presented by legal sports betting.

If the high court rules that states are free to legalize sports betting, the decision to do so would belong to the Legislature and Gov. Charlie Baker. With that in mind, the Gaming Commission late last year set out to assemble information on the case, the current betting landscape and how other states are positioning themselves to take wagers.

Connecticut, Delaware, New York, New Jersey, Pennsylvania and Mississippi have already enacted legislation to legalize sports betting if PASPA is overturned, and Rhode Island is considering similar legislation.

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In its white paper, the Gaming Commission laid out issues for lawmakers to weigh if they consider legalizing betting, like whether the federal Wire Act may still constrain legal betting regardless of how the Supreme Court rules, whether to allow only existing gaming licensees to take bets or if the market should be opened to newcomers, and whether Massachusetts would accept bets online.

"The introduction of a new aspect of the emerging gaming industry in Massachusetts presents an opportunity to bring a significant amount of gaming activity and revenues out of the shadows and into the legal market," the commission wrote. "With that transition would come the opportunity to cultivate the associated economic benefits -- including tax revenues -- while providing consumers of sports betting with protections not afforded them by illegal bookmakers."

The commission cited an Oxford Economics for the American Gaming Association study last year that estimated Massachusetts would collect $8.6 million in annual tax revenue if it allowed betting at brick-and-mortar casinos only and taxed the sportsbook's gross gaming revenue at a "low tax" rate of 6.75 percent. The state might collect $61.3 million if it allows betting at casinos, retail locations and online, and agrees to a "high tax" rate of 15 percent.

In addition to considering a tax rate, the commission suggested that the Legislature think about who it would allow to provide sports betting -- the state's casinos, racetracks and off-track betting parlors would likely be interested in jumping into the industry -- and whether bettors would be allowed to place wagers on their phones or online.

"These questions, when contemplated within the framework of the overarching policy objectives, bring to light many of the important issues regarding both the scope of a potential sports betting regime and the potential legalization strategies necessary for a thoughtful regulatory approach," the commission wrote.

Among possible options presented by the Gaming Commission for the Legislature's consideration is the establishment of a single online gaming regulatory body to address questions of regulation for sports betting, daily fantasy sports and any other form of internet-based gaming that may be developed.

"Under that approach a regulatory body would be provided the authority to address the broad subject of online gaming (including sports betting) and thus could quickly react to an industry where change is constant," the Gaming Commission wrote.

Justin Stempeck, the commission's associate counsel, told the commission on Thursday morning that the white paper intentionally does not prescribe an approach to the issue. The paper "remains generally agnostic as to what is the best approach," he said. "We're really giving a menu of the variety of approaches."

The commission said the state's three licensed casino operators -- MGM, Wynn Resorts and Penn National Gaming -- would be interested in taking wagers if Massachusetts makes betting legal.

On Beacon Hill, where lawmakers and the Baker administration have been coping with sluggish tax revenue growth, the idea of legalizing sports betting has not been in play to this point, but lawmakers have also taken steps to be prepared to act if the federal ban on betting is lifted.

A bill mostly dealing with daily fantasy sports (S 2273) filed by Sen. Eileen Donoghue includes a section that creates an eight-person special commission to "conduct a comprehensive study and offer proposed legislation relative to the regulation of online sports betting" if the Supreme Court deems any part of PASPA unconstitutional. The commission would be charged with making recommendations within 120 days of the court's decision.

"The general feeling is that if suddenly sports betting, which is an enormous illegal industry right now, were to be given a green light that things could happen very rapidly," Donoghue said in January.

Rep. Joseph Wager, House chairman of the Committee on Economic Development and Emerging Technologies, said at a hearing on Donoghue's bill last month that he agrees that Massachusetts should consider sports betting on an "expedited basis" if the Supreme Court allows.

"It's big business, it's serious money potentially and the revenue impacts for the commonwealth, favorable revenue impacts, are likely substantial and I think we need to try to get ahead of the curve," he said.

In 2017, a UMass Lowell-Washington Post poll found that 55 percent of Americans support making gambling on professional sports legal in all states and that one in five people surveyed had placed an illegal bet. Thirty-three percent of respondents disapproved of allowing gambling on professional sports in all states, and another 12 percent had no opinion, according to the poll.

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